Labour Demand Trends and the Determinants of Unemployment in

Labour Demand Trends and the Determinants of Unemployment in South Africa

2010 CCMA COMMISSIONERS INDABA

“Against all Odds” Ritz Hotel 2 – 4 December 2010

Understanding the post-apartheid Labour Market: Key Messages   



The key drivers of employment trends since 1995 in the South African labour market Assessing Sectoral and Skills Trends in Employment Have the institutions of human capital changed labour market outcomes? Do institutions and regulations matter?

Six Key Labour Market Challenges 1. 2. 3. 4. 5. 6.

Race, Gender and Age continue to influence access to employment and earnings Employment Generation of the type since 1994 sectorally uneven The Skills Mismatch between Labour Demand and Supply Continues Unabated The Institutional and Regulatory Environment Remains Critical The Spatial Dimension to Employment Creation is Critical The Quality of Higher Education Remains a Significant Constraint

Challenge 1: Race, Gender and Age continue to dominate labour market outcomes: Pr (Employment) Results 1995,2001, 2009 0.4 0.3 0.2 0.1 0

1995 -0.1 -0.2 -0.3

2001

2009

Coloured Asian White female 25-34 35-44 44-54 55-65

Challenge 1: Race, Gender and Age continue to dominate labour market outcomes: Earnings Function Estimates 1995, 2001, 2007 1 0.8 0.6 1995 2001 2009

0.4 0.2 0 Coloured -0.2 -0.4

Asian

White

Female

Challenge 2: Employment Generation of the type since 1994, sectorally uneven Employment Growth by Sector, 1994-2009 (‘000s) 4000 3500 3000 2500

2000 1500 1000 500 0 -500 -1000

Challenge 2: Employment Generation of the type since 1994, sectorally uneven Financial & Business Services Revisited

0

200

400

600

800

1,000

“labour recruitment and provision of staff; activities of employment agencies and recruiting organisations; hiring out of workers (labour broking activities); Investigation and security activities;

financial_intermediation auxilliary_intermediation renting_of_equip__person_ r_d

pension_and_insurance real_estate computerr others

Outline

Challenge 2: Employment Generation of the type since 1994, sectorally uneven

0

200

400

600

800

Wholesale & Retail Trade Revisited…..

motor)wholesale&commission motor_trade

nonmtorR hotel_restaurants

Outline

Challenge 3: The Skills Mismatch between Labour Demand and Supply Continues Unabated : Aggregate Employment, by Education Level (% Change) 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% -4.00%

.22 .21

1.5

.19

.2

2

2.5

3

ratioskuskemp

.23

3.5

.24

4

Challenge 3: The Skills Mismatch between Labour Demand and Supply Continues Unabated Skilled-Unskilled Relative Wages and Employment, 2001-2007

2000

2002 ratioskuskmw

2004 year

2006 ratioskuskemp

2008

Challenge 4: The Institutional and Regulatory Environment Remains Critical:

.2

.4

Union

.6

.8

Union Wage Gap Estimates Across the Earnings Distribution, 2001 and 2007

0

.2

.4

Quantile 2001

.6

.8 2007

1

0

20

40

60

80

Challenge 4: The Institutional and Regulatory Environment Remains Critical: Employment Rigidity: Cross Country Percentile Distribution and South Africa, 2010

0

20

40

60

80

Percentile Empl Rigidity UMI Empl Rigidity Global

SA UMI Distribution SA Global Distribution

100

Challenge 5: The Spatial Dimension to Employment Creation is Critical

0

.5

1

1.5

2

2.5

Mean Transport Expenditure % of Household Expenditure, By Mode of Transport

African

Coloured

Indian Private

White Public

Total

Challenge 6: The Quality of Higher Education Remains a Significant Constraint : Probability of finding employment: Results from a Sample of HEI Attendees Dependent variable: Probability of employment Individual characteristics Graduated 0,5368 African 0,5692 Coloured 0,1188 Indian/Asian 0,0235 Female 0,5437 HBI 0,6376 Technikon 0,5657 Degree qualification 0,5288 Africans from HBIs 0,4241 Africans from HWIs 0,1451 Coloureds from HBIs 0,0602 Coloureds from HWIs 0,0587 Indians/Asians from 0,0148 HWIs Other from HBIs 0,1533 Humanities 0,2921 Education 0,0931 Commerce 0,1962 Other field 0,1195 Mathematics scores in Matriculation 2,3807 Used social network 0,2966 26-35 0,3663 36-45 0,0803 46-55 0,0171

Marginal effects x-bar

I

II

0,0037 -0,2811** -0,0713 0,0639 -0,1681**

0,0007 -0,2865** -0,0607 0,0903 -0,1650**

0,0423 0,0719*

--0,0708*

0,0330

0,0366

---------

-----------

-----0,0265 0,2145**

---0,0190 0,2168**

0,0520 0,0642 0,0251**

0,0540 0,0724 0,0243**

0,0232 0,0688** 0,1991** 0,1854**

0,0253 0,0678** 0,2018** 0,1882**

Notes: 1. *Significant at the 1% level. **Significant at the 5% level. ***Significant at the 10% level. 2. Provincial controls were included but are not shown in the table.

III 0,0084 -------0,1658** --0,0594* 0,0307 -0,2248** -0,2647** 0,0324 -0,0505 0,1003 0,1164 -0,0274 0,2127** 0,0554 0,0641 0,0260** 0,0199 0,0672** 0,01995** 0,1845**

IV -0,0002 -0,2666** -0,0741 0,0826 -0,1568 0,0454** 0,0636* 0,0221 --------------------0,0275** 0,0318 0,0878** 0,2487** 0,2295**

Recommendations: Four Microeconomic Policy Options 

Three New Options for Growing the Informal Sector   

 

Public and Private Employment Services: Reducing Information Asymmetries in the Labour Market New Measures to Support the Unemployed   



Public Sector Procurement Short-Term Insurance FDIs and the Informal Sector Loan Book

Conditional Cash Transfers and the Training Layoff Scheme A Transport Voucher Scheme to reduce transaction costs of spatial disparities A wage subsidy cum employment generation for young, African female workers

Labour Regulation at the Margin  

Fix the Institutions of the Labour Market (LCs; LACs) Probation and Pre-Dismissal Procedures of the LRA

Conclusions 

Are we Going through a new policy revolution? 

   



Trying some new ideas?   



Training Layoffs to stay? Skills Under a New Regime DoL’s Renewed Focus Old Macroeconomic Debates are back in the arena (Inflation Targeting, Exchange Rate, Fiscal Policy and Pump-priming…….) A New (Old-Style) Industrial Policy? The insertion of the informal economy into all facets of industrial policy A re-fashioned UI Scheme? Political Economy Issues and revisiting the social compact?

Lest we Forget:  

Understating the relevance of Financial & Business services in employment and output growth? Growth Path and Labour market Outcomes are inextricably linked